Shares of Fannie Mae and Freddie Mac are rising from the dead, up 384% and 329% respectively year-to-date.

The GSEs also remain the biggest providers of liquidity in the mortgage market. Together with the Federal Housing Administration, they back nine out of every 10 new mortgages originated today, with private capital largely missing from the market.

Still, there is no talk of the companies returning to private hands, much to the chagrin of shareholders who have held onto the shares. In fact, practically everyone in Washington wants them dead.

'Guaranteed to Fail'

That's because the fall of Fannie Mae and Freddie Mac was not merely a story of reckless risk-taking and corporate excess. It was also deemed a failure of a system of mortgage finance that the government promoted for decades.

Fannie Mae and Freddie Mac were private companies that were chartered by the government. That meant that while they pursued maximum shareholder profits like any other private company, they also served a public mission -- to provide liquidity to the mortgage market and keep mortgage loans affordable.

The GSEs did not directly lend to borrowers. Rather they bought mortgage loans from banks, thereby leaving lenders with the liquidity to make more loans. They made it possible for a product like the 30-year fixed rate mortgage to become widely available at low interest rates because they absorbed the risks of borrower default, as well as the risk that market rates could rise over the repayment period.

The GSEs held the mortgage loans on their balance sheets but also routinely packaged loans into securities and sold them to investors. They continued to guarantee payment of principal and interest on the loans backing those securities, while investors shouldered the interest rate risk.